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My late Father-in-Law served in the RN from 1933 to 1955. At the start of the war he was on HMS Intrepid, responsible for the sinking of U45, took part in rescue of survivors from HMS Courageous, the interception of the Altmark, the destruction of the German tanker Baldur, numerous mine-laying operations which resulted in the sinking of further U-Boats and the evacuation of Dunkirk. Here she provided Naval Gunfire Support for the trapped troops, rescued survivors from SS Mona’s Queen on passage to the beaches and embarked 661 troops from the pier at Dunkirk. Subsequently she was damaged by an air attack at Dunkirk. A near miss from a bomb killed 2 and wounded 17 of men, the red-hot bomb splinters setting the ship on fire.On the 28th September 1940 he was drafted to HMS Burnham (formerly the USS Aulick), one of the 50 destroyers which the UK acquired from the USA. First some back ground of the 50 destroyers acquired by the UK:BackgroundThe US Navy had embarked on a major capital ship programme prior to 1914 but were woefully short of other modern ships in at the start of WW1. The US embarked on a massive destroyer construction programme, drawing on their perceived lessons of the European war, resulting in these ships which are often known as the “four stack” or “flush deck” type.When the USN procured these vessels, they defined only the basic dimensions, armament, type of propulsion and contract speed. There were considerable detail differences between them especially due to war-time supply problems. Although they are often referred to as a single type, they did in fact comprise three different classes (Wickes, Clemson, Caldwell) with a total number of 273 vessels built by two main contractors and a number of others.Calling them “Four Stackers” is perhaps a little misleading as some only had three (HMS Leeds/USS Conner, HMS Ludlow/USS Stockton and HMS Lewes/USS Conway). Three others were converted to long range escorts by the British which involved removing the two forward boilers and associated smokestacks to fit extra fuel bunkerage (HMS Bradford, HMS Clare and HMS Stanley).Original DesignThe hull form had much finer lines than equivalent UK designs, fore and aft, and although they had a fair amount of sheer, not much freeboard forward. Combined with a lack of flare this meant that the hull would pierce waves more readily than ride over them and together with a large access hatch ahead of the forward 4” gun, the Flush Deckers were inevitably wet, uncomfortable ships.Main armament consisted of four 4” guns. Unlike British practise of mounting these on the centre line, two of these guns were mounted high up on the beam, restricting their arcs of fire, and putting weight high up which affected stability. The ships were fitted with one 3” AA gun. Their only sensors were range finder optics and the Mk1 eyeball. They were not fitted with ASDIC originally although some sets had been fitted by the USN. The fine lines at the stern provided very little room for depth charge rails (not envisaged at the time of design) and there were no throwers.American naval doctrine called for destroyers to carry out massed torpedo attacks on a battle line. Rather than attempt re-loading in the cramped deck spaces, the Flush Deckers had two triple torpedo mountings on each side. The concept being that the tubes are swung outboard, a broadside of six torpedoes fired at the enemy line and then a 180 degrees turn is executed to bring the other tubes into play. Unfortunately anything more than a slow turn in calm seas dipped the tubes to into the swell causing damage to the tubes and/or mountings. The weight of the four mountings adversely affected stability and further increased the degree of roll. The sterns also tended to dig unto the sea during a turn which also limited the turning rate.Despite their small size the Flush Deckers were not very manoeuvrable which is a highly undesirable characteristic for anti-submarine warfare as the attacking destroyer had to pass over the U-Boat to drop its depth charges and then go about to repeat the attack. The longer the delay in turning, the more options the U-Boat has to manoeuvre and evade being re-acquired by the destroyer’s ASDIC .There were several other problems too. The fine lines at the aft end meant that the tips of the propellers projected significantly beyond the ships aft sides which resulted in a much increased incidence of damage when coming along side. (Other answers have said that the propeller shafts did not counter-rotate and that this adversely affected steering but Picture 3 below in dry dock shows that the shafts did counter-rotate although I don’t know whether this is the case across all the classes that made up the British Town class as a whole).The steering gear was provided by wires and chains across the upper deck, an arrangement used in trawlers and other small craft. This exposed the steering gear to weather damage, debris etc. causing the steering to jam, usually at an inopportune moment. The history of these ships in UK hands shows a regular litany of collisions and groundings.The enclosed bridge, and in fact the vessel as a whole, did not withstand severe Atlantic weather as can be seen from the photos below. It is clear that these ships were not great even when new and would have struggled with their designed role let alone carrying out a new role as convoy escorts.SpecificationsThere were three different classes (and actually four different variants) which comprised the Flush Deckers, all with similar specifications.Displacement (Standard): 1020 – 1190 tonsDisplacement (Deep): 1145 – 1725 tonsLength overall: 314’ 4” – 315’ 6”Beam, maximum: 31’ – 31’ 8”Mean Draught: 11’ – 12’ 10”Machinery: Geared turbines (except for 2 which had direct drive turbines)Shafts: 2 (except for 2 which had 3 shafts)Speed in 1941: 28.5 – 30 knotsBoilers: 4Armament: 4 x single 4”, 1 x single 3”/23 cal AA gun, 4 x Triple 21” Torpedo TubesRange: About 2,000 miles at 10 knots, convoy duty probably reduces this by 1/3Acquisition by the UKIn early 1940 the British destroyer force had suffered considerable loss and damage due to fighting in Norway and the Low Countries. In May 1940 the British Ambassador in Paris advised that the US had discussed the possibility of France acquiring 12 older destroyers and had then raised the query as to whether the UK would like 50 or 100 such ships. The British immediately responded that they would like 16 modern destroyers, 32 Flush Deckers and 1,000 close range AA weapons. The matter then bogged down in diplomatic circles until the losses at Dunkirk and the prospect of invasion concentrated the minds of those involved.At the beginning of August 1940, President Roosevelt suggested either that that the US might sell 50 destroyers to Canada against a legal lien on British cruisers in Canada’s favour such that if defeated, Britain would cede the ships to Canada who would donate them to the USA or transfer the ships in return for the sale of base rights to the USA. Churchill rejected the first option as impractical and the second as undesirable but accepted that the leasing of base rights in principle. Thus the negotiations over the 50 Flush Deckers became the fore runner of the whole lend-lease agreement. Events then moved so rapidly that by the middle of August the Admiralty was discussing manning of ships with Dominion navies and by the 1st of September the transfer was agreed with 1,000 officers and ratings sailing that day to Halifax, Nova Scotia.UK ServiceThe 50 ships chosen for transfer, mostly in reserve, some active and a couple stricken from the US Navy List, were steamed by their US crew to Halifax Nova Scotia. Here over a couple of days their new UK crews were familiarised with their ships, spent a day at sea and then the US colours were hauled down and the ships commissioned into the RN. Initially these ships were to have retained their American names out of courtesy but in due course it was decided to rename all 50 with names of towns common to the U.K. and the USA and so became the Town class.In Halifax a detailed survey was carried out and a report made out to the Admiralty. In general the condition of the hulls and main machinery was found to be reasonable but that the auxiliaries, wiring, piping were poor. Several of the ships suffered complete power loses due to contaminated fuel. At the time the tanks were pumped out, cleaned and carefully fuelled to resolve the problem The vessels weren’t dry docked so the actual cause wasn’t discovered at the time (rusted rivets allowing seawater into the fuel tanks). This problem was never fully rectified so the danger of contaminated fuel remained throughout their remaining service life.1 - Water pouring from HMS Burnham's fuel tanksThe Inspecting Officer disliked the enclosed bridge which didn’t reflect British practise of using an open bridge, he commented adversely on the wire and chain steering gear and produced a long list of improvements to be put in hand as soon as possible.He noted that the 4” gun was a low compact weapon compared with the British equivalent but that the ammunition was fragile and the replenishment from the magazines (which had no flooding arrangements) difficult and labour intensive.The 3”AA gun was capable of elevating to 70 degrees but could not actually be operated past 40 degrees as it could not be served at these elevations thus limiting its effectiveness against air targets. The sights were in any case not suitable for high elevation use. Space for depth charge throwers was very limited but would have to be fitted. The torpedoes were a poor design and known to run below their set depth.In conclusion the report called for the removal of the four triple torpedo mounts to be replaced by a single British triple launcher on the centreline, a complete gun rearmament with British weapons, removal of the mainmast, shortening of the foremast and removal of the aft search light platform, all in a bid to improve stability. The Admiralty commented that the report “was most interesting” and that once this was done would bring the vessels up to an equivalent of the British “S Class”. Of the 50 ships, six were manned by the Canadians and the remaining 44 sailed for the UK where they underwent refits in Devonport to rectify the most pressing defects and carry out some at least of the desired improvements depending on the timescales of the required work. The initial refit included:• Removal of the mainmast and shortening of the foremast• Shortening the aft 3 funnels by several feet• Removal of the aft 4” gun and the 3” AA gun• Fitting a British 12 pounder HA mounted in the “X” position• Removal of the aft two sets of torpedo tubes• Fitting of depth charge throwers• Fitting ASDIC where the equivalent US gear wasn’t already present and fitting British trace recorders on all ships.As the war progressed, addition modifications were made to reach a Stage 2 condition which involved:• Removing the bear 4” guns and fitting single manual 20mm Oerlikons instead• Removing the two forward triple torpedo mountings and replacing with a single British triple mounting aft of the funnels• Fitting Radar Type 286 at the masthead• Fitting Radar Type 271 on top of the bridge.Over time some additional modifications were carried out for instance to fit the Hedgehog ASW forward throwers on the foredeck and the fitting of HF/DF on its associated tall mast aft.Three of the ships were converted to long range escorts by removing their forward boilers (with the associated funnels) and replacing them with additional fuel tanks for 80 tons of additional oil. This reduced their top speeds to 25 knots but with an extended range. Accommodation and stores spaces were provided above the new oil bunkers, a new British style bridge constructed and the ASDIC updated.2 - Stern View Showing Vulnerable Props and Cramped Quarterdecks for Depth Charge Rails and ThrowersService HistoryOf the 50 ships transferred, the six initialled manned by the Royal Canadian Navy remained in Canadian waters. The 44 British manned ships were destined to sail to the UK for brief refits prior to entering service in UK waters. A number of these were delayed in sailing to the UK due to accidents and breakdown. A further ship was transferred to the Canadians and later some of the Canadian ships were refitted in the UK.The British manned ships were used in three main areas. Rosyth based ships served carried out escort duty for East Coast convoys; those in the 1st Minelaying Squadron served as Anti-Submarine escorts on the Northern Mine Barrage scheme and the balance served as escorts on the North Atlantic convoys. The Rosyth ships remained on that duty throughout the war. The 1st Minelaying Squadron ships passed into Reserve when the squadron was disbanded in 1943. Those vessels on the North Atlantic convoys gradually passed into second line duties or into Reserve as age took its toll.For those on escort duty the number of successful attacks on U-Boats doesn’t necessarily tell the whole tale. The presence of escorting destroyers often served to disrupt and frustrate enemy action against convoys and this should be seen as a success even if no U-Boat was damaged or destroyed. The following is a list of 11 successful attacks in which Town class destroyers participated (even if this was in co-operation with other vessels, and the Town class in question was not directly attributed with the actual sinking):22/2/41 Italian submarine Marcello sunk with all hands by HMS Montgomery during patrol. Boats9/5/41 U110 sunk by HMS Broadway whilst attacking Convoy OB 318, 15 dead and 32 men captured The Type IXB U-boat U-1103/8/41 U401 sunk with all hands by Norwegian ship HNoMS St. Albans whilst attacking Convoy SL 81 The Type VIIC U-boat U-40111/9/41 U207 sunk with all hands by HMS Leamington whilst attacking SC 42 The Type VIIC U-boat U-20717/12/41 U131 sunk with all hands by HMS Stanley whilst attacking HG 76 The Type IXC U-boat U-13118/12/41 U434 sunk with all hands by HMS Stanley whilst attacking HG 76 The Type VIIC U-boat U-43427/3/42 U587 sunk with all hands by HMS Leamington whilst attacking WS 17 The Type VIIC U-boat U-58724/7/42 U90 sunk with all hands by Canadian ship HMCS St Croix whilst attacking ON 113 The Type VIIC U-boat U-904/2/43 U187 sunk with all hands by HMS Beverley whilst attacking SC 118 The Type IXC/40 U-boat U-1874/3/43 U87 sunk with all hands by Canadian ship HMCS St Croix whilst attacking KMS 10 The Type VIIB U-boat U-8714/5/43 U89 sunk with all hands by HMS Broadway whilst attacking HX 237 The Type VIIC U-boat U-89The destruction of U110 is perhaps one of those events that helped to ensure the eventual Allied victory in the Battle of the North Atlantic. This extract is from The U-boat Wars 1939-1945 (Kriegsmarine) and 1914-1918 (Kaiserliche Marine) and Allied Warships of WWII:"The Secret Capture"U-110 was captured by the Royal Navy on May 9 1941. This was perhaps the most important capture of the entire war and was so secret that even the crew of U-110 did not know of it! U-110, under the command of Kptlt. Fritz Julius Lemp, had been attacking a convoy in the Atlantic south of Iceland together with U-201 (Oblt. Adalbert Schnee), when Lemp left his periscope up too long (probably to confirm a kill: he sank two ships totalling 7500 GRT that day) and the escort corvette HMS Aubretia sighted it and rushed to the scene and began depth charging.U-110 survived the first attacks, but then HMS Bulldog and HMS Broadway joined the hunt. U-110 was forced to surface, and HMS Bulldog immediately set course to ram (its commander realised it might be possible to capture U-110, and veered aside at the last moment) which caused Lemp to order "Abandon Ship". Lemp assumed the boat would be sunk, and its confidential material would go down with it. When he was in the water he realised the boat was not sinking, and attempted to swim back to prevent capture. That was the last seen of him. Members of U-110s crew later claimed he was shot in the water by the British boarding party, but that was never confirmed.The boarding party commanded by Lt David Balme made several journeys between U-110 and HMS Bulldog to collect whatever they could get their hands on inside the boat. This proved to be very fruitful, as U-110 was abandoned in a hurry, and being a Type IXB U-boat, did not sink as rapidly as a Type VIIC would have. It is almost certain that many U-boats were sunk as a result of the material found inside U-110, including an Enigma machine with rotors set and current code books.The day after the capture, the British Admiralty realised the importance of this, and that if the Germans knew the boat had been captured, they would assume the worst and change their codes and cipher system. The boat was accordingly ordered to be scuttled while being towed to Britain, the surviving crew were taken straight to Iceland to be interned, and everyone involved in the capture sworn to secrecy. 15 of U-110's crew died in the action and 32 were interned.This event was the subject of a British parliamentary motion in 1999 condemning the portrayal of the capture of U-110 and subsequent breaking of German codes as an American success in the film U-571.War losses were not all one sided of course. A total of nine Town class ships were lost on active service as follows:19/8/41 HNoMS Bath, escorting Convoy OG 71, was hit by two torpedoes from U-204 with the loss of the Commanding Offices and 82 crew USS Hopewell (DD-181) - Wikipedia31/1/42 HMS Belmont was sunk by U-82 with loss of all hands (138) USS Satterlee (DD-190) - Wikipedia11/4/1943 HMS Beverley was seriously damaged in a collision with a merchantman in Convoy ON176. She fell out of the convoy and was sunk by U-188 the following day with only four survivors out of a crew of 155 USS Branch (DD-197) - Wikipedia18/1041 HMS Broadwater was torpedoed by U-101 whilst escorting Convoy SC 48 USS Mason (DD-191) - Wikipedia15/12/40 HMS Cameron sunk in Portsmouth harbour by bombing without ever becoming operational. Later refloated and used as a hulk and for shock testing USS Welles (DD-257) - Wikipedia16/1/45 HMS Churchill transferred to Russia as Dejatelnyj sunk as she attacked a diving U-Boat. A heavy explosion blew her stern off subsequently sinking with the loss of the Commanding Officer and 116 men with only seven survivors. It isn’t clear if the explosion was a torpedo, mine or accidental detonation of a depth charge USS Herndon (DD-198) - Wikipedia27/9/44 HMS Rockingham struck a mine whilst acting as a target for aircrew training. Sank under tow USS Swasey (DD-273) - Wikipedia20/9/43 HMCS St Croix, escorting Convoy ON202, sunk by U-305 using a Gnat Acoustic Homing torpedo. 68 crew were lost, 5 Officers and 68 Ratings were picked up by HMS Itchen. She was sunk a few days later by U-666. Only one of the St. Croix crew survived the second sinking USS McCook (DD-252) - Wikipedia19/12/41 HMS Stanley sunk by U-574 with only 25 survivors whilst escorting Convoy HG 76. The U-Boat was swiftly sunk by the Sloop HMS Stork USS McCalla (DD-253) - Wikipedia3 Newspaper Front Page Report on Loss of St CroixThe Town class as a whole didn’t become operational until early 1941, well after the reasons for their emergency acquisition had passed. They also passed into second line duties or reserve fairly quickly with few remaining in front line duty beyond 1943. The Town Class vessels were seen as particularly dispensable. Some ships were lent to Russia or were manned by the Norwegians. HMS Cambletown was manned at various times by a part Polish, a Dutch and finally a British crew before being expended on the St Nazaire attack. Operation Chariot, perhaps the most famous Commando raid of the entire war resulted in the destruction of the only dry dock in France capable of accommodating the Tirpitz.4 - Remains of HMS Cambletown after the Explosions which Destroyed the St. Nazaire Dock CaissonSt Nazaire Raid - Wikipedia.Whilst there is no doubt that the Town class destroyers did contribute to the Battle of the North Atlantic, the quote that they were the “50 ships that saved the world”, was rather a long way from the truth. They did do was represent the start of the Lend Lease approach and brought forward the participation of the USA in the war against the Nazis.HMS BurhamHMS Burnham, formerly USS Aulick was the ship which my Father-in-Law, David McGarva, joined on 28th September 1940 as an Engine Room Artificer 2nd Class (ERA Cl 2). He left the ship on the 18th November 1942 as Acting Chief Engine Room Artificer (A/CERA).5 - USS Aulick as built6 - HMS Burnahm post refit. Radar 271 (on new bridge roof) and 286 on foremast, Centre line Torpedo Tubes. May – October ‘42Summary of HMS Burham’s War ServiceIn many ways HMS Burnham’s service record is typical of the class. She was commissioned at Halifax on 8th October 1940 and then sailed for Devonport on the 16th October where she completed as brief refit before working up at Scarpa Flow from 12th November. She then joined the Western Approaches Command. Her first job was escorting the new carrier HMS Formidable from Belfast to the Clyde and then was tasked with bringing in convoy SL56. Severe weather damage incurred during this task resulted in her being placed on repair at Belfast from 17th December to 30th January 1941. The damage can be seen in the photos below. The bridge was badly damaged, boats carried away, the main mast bent and torpedo tubes damaged. Much of this is likely to be due to the effect of the classes’ poor seakeeping.On completion of repairs HMS Burnham joined the 12th Escort Group operating in UK waters. A collision with HMS Malcolm on the 3rd March sent her into Liverpool for repairs lasting to 27th April. On completion she proceeded first to Iceland where the 12th Escort Group was now based and then to St. John’s, Newfoundland in late May 1941 to join the Newfoundland Escort Force.A second collision, this time with sister ship HMS Chesterfield, put her into Boston for repair from mid-September to 23rd October 1941, after which she resumed escort duty from St. John’s. In March 1942 the ship went South to Charleston SC for a six week refit, followed by a month’s duty based on Bermuda. Following this she returned to the Royal Canadian Navy remaining in Canadian waters until called home to the UK for a refit on the Thames during November and December 1942.On completion of this refit and work up, HMS Burnham joined the Canadian C3 Escort Group and remained on trans-Atlantic escort duty until late October 1943.By that date new ships were replacing many of the oldest escorts. HMS Burham returned to the Western Approached Command and was refitted in Liverpool as an Air Target Ship. Duty as an Air Target Ship lasted eight months from March 1944 to 1st December 1944 paying off to Reserve until listed for disposal. In March 1947. She arrived at Pembroke Dock on 1st December 1948 to be broken up.7- HMS Burnham Bridge Damage8- HMS Burnham Severe Weather DamageThe North Atlantic is unforgiving. Gales and heavy seas are not the only problem; sub-zero temperatures in winter could result in the formation of ice on the upper decks. The vessels were already top heavy so it is necessary to chip away the ice with axes or hammers to prevent the danger of a capsize.Apart from the dangers from weather and sea, there was always the danger presented by the enemy, mostly U-Boats, sometimes aircraft and on two occasions narrowly avoiding Bismark (Convoy HX 126) and Gneisenau /Scharnhorst (Convoy HX 106).9- HMS Burnham IceEscort ServiceThe two years David spent on Convoy duty must have been extremely tough, cramped and with miserable conditions, mostly tedious and with only rare moments of excitement to alleviate the boredom. It was mentioned above that these ships were ‘wet’ due to their seakeeping characteristics and the foredeck hatch down to the mess decks. The ship’s bows would penetrate rather than ride over waves and water inevitably found its way below. As an ERA, David spent his watches in the machinery spaces and Engine Room, ankle or calf deep in near freezing Atlantic water which swirled around the deck. I imagine that the mess decks were little better. Eventually he was hospitalised with Trench Foot as a result.Typically escort vessels didn’t have the range to accompany a Convoy from departure to arrival so escorting vessels would for example assemble with the Convoy at Halifax, hand over to replacement escorts based in Iceland and they would subsequently hand over to escorts for the Western Approaches.During her war service HMS Burnham escorted at least 49 Convoys as below, details of which can be found in Home of Siri (Holm) Lawson/Warsailors.com, ConvoyWeb or Royal Navy and Naval History.Net :ONS (Liverpool to Halifax (Slow) – ONS 016 and ONS 019HX (Halifax or NYC to Liverpool) – HX 106, HX 109, HX 124, HX126, HX130, HX136, HX 143, HX 144, HX 193, HX 201, HX 221, HX 226, HX 238, HX 244, HX 249, HX 255 and HX 262OB (UK Liverpool Outbound) – OB 283, OB 289, OB 319, OB 322, OB 334 and OB 347ON (UK to NYC, Halifax, Cape Cod or dispersed) – ON 8, ON 38, ON 50, ON 69, ON 100, ON 113, ON 119, ON 129, ON 152, ON 163, ON 172, ON 180, ON 187 and ON 192SC (NYC, Sydney SC, Halifax to UK Liverpool) – SC 33, SC 53, SC 59, SC66, SC 89, SC 97, SC 102 and SC 124SL (Freetown to UK) - SL/MKS 56TH NN2 (Trinidad to Halifax)Convoy HX 126This is an account of Convoy HX 126, reproduced from Convoy HX 126 General Report as below. It should be noted that on leaving HX 126 around the 25th Maythe Icelandic based escorts passed within 17 miles or so of the Bismark which was on the loose following the Battle of Denmark Strait on the 24th May and the sinking of HMS Hood:HX 126 departed Halifax on May 10-1941 and arrived Liverpool on the 28thOcean Escort: HMS Aurania and HMS TribuneLocal Escort: HMS Malcom, Burnham, Scimitar, Burwell, Mallow, Verbena, Arabis, Heliotrope, Northern Gem and Northern Wave (Westerly rendezvous).Also, HMS Keppel, Sabre, Lincoln, Dianella, Sunflower, Kingcup, Gladiolus and Springbank (Easterly rendezvous).May 19:19:13 - Admiralty made G.M.B.S. to all stragglers from HX 126, giving them a route in.May 20:06:01 - Malcolm reported that he and Scimitar (from OB 322) were proceeding to Iceland to refuel, while Burnham, Burwell, Mallow, Heliotrope, Arabis, Verbena, Norther Wave and Northern Gem were proceeding to meet the convoy.06:31 - Aurania reported that Norman Monarch and Harpagus had been torpedoed.11:50 - Aurania gave a U-boat sighting report.12:59 - Burnham reported that she and Burwell were proceeding to this position, followed by remainder of escort vessels.13:00 - Darlington Court and British Security were reported torpedoed and at 16:08, Aurania reported that convoy had scattered.13:41 - Admiralty warned the convoy that a it had been sighted.14:44 - Aurania replied that the convoy had already scattered, and that 3 ships had been sunk (see Aurania's report).13:58 - (the times don't make sense here) Commander in Chief consequently ordered Malcolm (who had proceeded to Iceland earlier) and the 12th Escort Group to attempt to reform the convoy.16:04 - Rothermere torpedoed.16:24 - John P. Pedersen torpedoed.18:01 - Burnham reported that she had the crew of Norman Monarch on board, giving the position, course and speed of Harpagus (which had also picked up survivors from Norman Monarch). Burwell was searching to the W.N.W., Burnham to the south (see also Burnham and Burwell's report).18:13 - Nicoya reported U-boat sighting (ref. her captain's report).19:10 - Northern Wave and Northenr Gem ordered to search for the torpedoed ships, together with Hontestroom, which was to be escorted. (The latter was a Dutch Rescue Vessel, on her way home, and not the Rescue Ship assigned to the convoy). Burnham reported having proceeded to the given position, but found nothing (again, see Burnham's report).May 2104:12 - Burnham reported Elusa had been torpedoed.04:34 - Burnham reported that she was rejoining Burwell, and had survivors from Harpagus and Norman Monarch on board. 17 ships in company.05:14 - Commander in Chief Western Approaches ordered Malcolm to report to Iceland at her discretion.05:51 - Burnham reported rescuing survivors from the torpedoed Elusa, on fire, but salvage considered to be possible. Vicinity of wreck had been reached one hour after the explosion, but searched without results.09:03 - Verbena reported having attacked an enemy submarine (this is also mentioned in the Commodore's narrative) in 58 55N 39 30W, and was ordered by Malcolm to remain in neighbourhood for 48 hours. Burnham was detached from convoy to assist.15:44 - Burnham reported several attacks on the submarine had taken place, but contact had been lost and not yet regained. By that time, Verbena had only one depth charge left.16:39 - C. in C. informed all escorts of the position as far as could be ascertained, ordering Arabis and the 2 trawlers with Hontestroom to continue searching for survivors, until satisfied all had been picked up.21:00 - Scimitar (having refuelled) repored she expected to rejoin convoy at 16:00 the next day.May 22:12:46 - Malcolm announced she had left the convoy with 17 ships, escorted by Burwell, Mallow and Heliotrope.16:53 - N.O.I.C. Iceland told Burnham and Verbena to expect air support.19:07 - Admiralty warned the convoy that it had been reported by U-boat, and was told to alter course to port, rejoining the route ordered in 61 40N 28W.19:37 - British Freedom ordered by Admiralty to proceed to Reykjavik, and if not present, Rosewood to go instead. (Burwell signalled at 06:29 on May 24 that British Freedom was not present, and that Rosewood was heading to Iceland as ordered).19:20 - Scimitar reported convoy "not met".May 23:06:01 - Iceland confirmed arrival of HMS Aurania.11:46 - Burnham reported that if no further contact was made she intended to abandon hunt at 16:00 that day.(There's a note here for 16:13 May 23, which looks like it has been crossed out, saying: "Keppel signalled not met Venemous, Lincoln, Sabre, Scimitar, Springbank and Toward").16:32 - Keppel, which was to join at 13:00 in 61 35N 25 45W, together with Sabre, Lincoln, Dianella, Sunflower, Kingcup, Lady Elsa and Springbank, reported "convoy not met", but subsequently announced at 21:56 that convoy had been met.19:01 - Aircraft reported the convoy in position 61 40N 27 30W, 095° at 16:00 hours, this position being about 30 miles astern of estimate.20:00 - Arabis, her fuel being expended, signalled Malcolm that she was returning to Reykjavik with Hontestroom. Northern Wave and Northern Gem continued their search for survivors of torpedoed ships.23:59 - Primrose signalled "not met"May 24:12:00 - Heliotrope signalled Iceland that estimated time of arrival Reykjavik was 21:00 May 24, with Scimitar and Rosewood.12:59 - C. in C. Western Approaches ordered Churchill to immediately proceed to Iceland at best speed, and was to await orders there after fuelling, along with Burnham.14:54 - C. in C. told Keppel that Kingcup was required for minesweeping (training?) for one day and was to leave convoy off Butt of Lewis and proceed directly to Loch Foyle, and to report estimated time of arrival when clear. Wires to be streamed and kites calibrated before arrival. M/S officer to report to N.O.I.C. Londonderry on May 27.May 25:10:10 - Iceland reported that in view of the situation Zwarte Zee and Buttermere were not sent to tow in Elusa, and proposed sending Zwarte Zee to the U.K. with B.D.? 4. If salvage of Elusa was still considered possible, Tenacity could be sent instead.17:45 - Burnham reported revised number of survivors from Elusa 49, Harpagus 16, Norman Monarch 22, for a total of 89.May 26:06:35 - Iceland requested Northern Gem and Northern Wave to report position of British Security and, if known, whether she was salvable.11:41 - Keppel was ordered to leave convoy off Butt of Lews and proceed to Scapa, and from there to ?(illegible) to refit.19:46 - Venomous signalled that escort was detailed as follows:Sabre for Loch Ewe - estimated time of arrival 01:30 May 27Venomous for ClydeLincoln and Mallow for Liverpool21:36 - Aultbea confirmed the arrival of Lincoln and at 06?:37, advised that she had sailed to rejoin the convoy.22:37 - Aultbea confirmed the arrival of Mallow, later signalling she had sailed May 27 (time illegible).23:58 (the date here still says May 26) - Loch Ewe confirmed arrival of HX 126 (including Westport from SC 31), except for stragglers Ribera and Eemland.May 27:03:13 - Sabre left Aultbea to rejoin the convoyConvoy arrived Liverpool on May 28.HMS Burnham's reportTo the Senior Officer of 12th Escort Group - dated May 24-1941(in HMS Malcolm's report, the 12th has been crossed out and replaced by an 8 - in other words, it's to the 8th Escort Group)May 2013:00 - Received a report of the torpedoing of the British Security. Directed Mallow to take charge of trawlers and corvettes and proceeded with Burwell, course 218°. Worked up to 26 knots.17:03 - Sighted a ship and altered course towards her on 270°. She proved to be the S.S. Harpagus. She had the crew of the Norman Monarch on board and thought most of the convoy were to the W.N.W. I directed Burwell to search in this direction while Burnham searched further south. Fifteen minutes after leaving Harpagus I received a sighting report of U-boat from S.S. Nicoya and proceeded towards the position at 26 knots at 18:15.18:30 - Ships were sighted to the Westward but none apparently being Nicoya. I proceeded on to position given.19:45 - Position was reached, but nothing was sighted. I swept West for half an hour and then turned North. S.S. Dorelian was sighted and I closed on her at 20:45. Set her course 037°, 10 knots.21:10 - Sighted the tanker Elusa ahead and closed her.21:55 - Sighted convoy, Burwell in company, 15 ships, course 044°, 8 knots. Had speed reduced to 6 knots while Dorelian and Elusa joined.May 2102:00 (about) - When screening on starboard bow of convoy a red flare was sighted. This proved to be from two boats and a raft with 35 survivors from S.S. Harpagus and Norman Monarch. *These were picked up and station regained at 03:15.03:30 - A tanker in the middle of the convoy was torpedoed. Search with star shell was carried out but with only two ships escorting the convoy it was impossible to make it effective. As it was not really dark I was in some doubt as to the U-boat being on the surface or submerged, consequently after searching on the bow and beam I carried out an Asdic sweep astern. In doing this I closed the burning wreck and found three boats and a raft with survivors. Finding nothing astern, the survivors were picked up. The master was still on board and had to be taken off with a line. The tanker proved to be the Elusa, 48 survivors*. Malcom arrived as the last of the survivors was being picked up and the convoy was rejoined with her.* Note that Burnham reported revised numbers of survivors on May 25: Elusa 49, Harpagus 16, Norman Monarch 22 - see this report.Elusa had been hit on the starboard side and was second ship in the centre column. When the explosion occurred two ships were lit up between her and Burnham and it seems probable that the U-boat dropped down from right ahead and got among the convoy escaping afterwards either ahead or astern. No doubt before attacking she had observed the positions of the escorting ships which were 10° before the beam of the leading wing ship on either side and covering as much ground as possible at a mean distance of one mile, and acted accordingly.Signed by J. BostockCommanding Officer of HMS Burnham.Letter to ForrestallOn leaving HMS Burnham, David was drafted to HMS Balfour, a brand new Captain Class Destroyer Escort (initially named as USS McAnn), powered by the very latest technology of a steam turbine/electric drive HMS Balfour (K464) - Wikipedia . She served with the 1st Escort Group and 18th Escort Group and took part in the Normandy invasion as part of the anti-submarine screen which protected the invasion fleet. She was also responsible for the demise of U672.Despite the privations and despite the fact that the Town class ships were very much on their last legs, I have no doubt that David and his shipmates were immensely grateful that the USA had provided some of the tools urgently needed to wage war against Nazi Germany. That is certainly the very strong impression given by his letter below.When going through David’s papers we came across a draft of the letter addressed to US Secretary to the Navy Forrestall. This is the transcript of the letter actually held in the Forrestall archive.E.R.A’s Mess,H.M.S. Balfourc/o G.P.O.LondonSept 16th 1945Dear Mr Forrestall,You may think it very presumptuous of me writing to you, but the truth is that I am a very disappointed Chief Engine room Artificer, the equivalent to a Chief Machinists Mate in your US Navy, on board the above ship. But I think you will agree that I have a small claim to write to you having had the unique experience of using American equipment and serving in Ex US and American built Lend Lease ships in the last five years.On Oct. 8th 1940 I had the privilege of being present at Halifax, Nova Scotia, when “Old Glory” or the Stars and Stripes was hauled down on board USS Aulick and I along with others walked on board and ran up the White Ensign and so commissioned HMS Burnham, one of the 50 over age destroyers.Previous to this I had lived on board with the US crew in the C.P.O.’s mess, as one of the key ratings I was working with the American crewmen getting to know the running of the machinery in the engine rooms, firerooms and other machinery spaces.Well Sir, I was on board the Burnham for over two years and two months and can assure you, that she did yeoman service for the Allied Cause in the North Atlantic on convoy escort duty when we were in such straits in those days when we stood alone. In fact we were credited along with a corvette with the destruction of a U-Boat. This Unterzeeboaten had created havoc on a convoy and we picked up ninety-one officers and men, the survivors of eleven sunken merchantmen, fifty-one of these were the Chinese of a Royal Dutch tanker. Whilst on the way back to Iceland, the hunt for the Bismarck was on and she actually passed us one night about seventeen miles from us and we carried on to Iceland and landed the survivors and arrived in port very short of fuel. About twenty tons of fuel were all that we had on board so you can well imagine we could not have even run from her had we been attacked.Now it was plain to see that the convoys would have to be escorted all the way across the Atlantic, so along with HMS Churchill we were sent from Iceland to St Johns Newfoundland to open up a base, and from here we convoyed back to Iceland. We kept on this job convoying from Newfoundland to Iceland and back again, all through the long wintry gales and heavy seas of the North Atlantic. I am quite sure if you care to examine the records, you will no doubt find that we were among the top in mileage covered by the Ex US destroyers in the years 1941 - 42.During my service on board the Burnham, we were twice refitted in U.S. Navy yards; first at South Boston Navy Yard in September and October 1941. This no doubt you well remember before the U.S. as a nation was involved in war, and secondly at Charleston Navy yard South Carolina in April 1942. where we had good attention and enabled us to keep our ship running during this period when we were so sorely tried and in great need of ships ans supplies. No Briton realizes any more than I do what we owe to your People and your great President for sustaining us during the years of the great build up period. As a sailor who has spent five years of this war in and around the great waters of the Atlantic, I saw the ever increasing volume of supplies coming across this great Ocean.After we left Charleston S.C. we were given a tough job. We dashed up to New York at 25 knots and you know what was happening on your Eastern seaboard at that time, passing newly sunken wrecks etc, still on we dashed because of the urgency of our job and we were actually machine gunned that night by a C.A.P. pilot who must have mistaken us. However he managed to drop the correct colour flare before he was shot at. We oiled in New York and took on tropical clothing for the crew and we left New York with our convoy of three large tankers after a stay of only 2 hours in harbour.This convoy we took down into the tropics, the temps of the firerooms and enginerooms reaching 130°F when we were battened down at nights, the tankers went up the Orinoco to load up their cargo of Venezuelan oil whilst we lay waiting at Port of Spain, Trinidad, as Venezuela was neutral in those days and so was barred to ships of the Royal Navy. When ready we left for Halifax, stopping at Bermuda to oil and then right on to Halifax N.S. where this convoy was welcomed as the stocks of fuel oil were getting low. We were congratulated on the safe delivery of our convoy as no doubt you will recall the U-Boat menace in the Caribbean and along your Eastern seaboard during May and June 1942.Next we were based at Halifax N.S. running from there with the newly assembled convoys and after seeing them well on their way we handed them over to British based escorts off Newfoundland. Then we took over the inward convoys and took them to Cape Cod after which we would tie up at the Commonwealth Pier Boston where we would lay for a day or so before proceeding back to Halifax. During those days in Boston it was a pleasure to relax and enjoy ourselves with some real and true friends, friends I had made amongst the machinists and workmen who had refitted my ship in South Boston Navy Yard. After a spell of this triangular run we returned to our old job of convoying all the way across the Atlantic from St John’s Newfoundland to the Western Approaches at Liverpool.Another distinction we had whilst convoying in the North Atlantic was that Mr. Churchill and a distinguished number of British and American politicians and naval and military experts on board the HMS Prince of Wales fresh from signing the Atlantic Charter at Argentia, Newfoundland, passed through a convoy led by the Burnham and her consort of corvettes, showing that our great wartime Premier and leader trusted the Royal Navy to his safe passage and delivery. He saw for himself that the old almost worn out and over age Ex USS destroyers were doing a great job on the broad wastes of the Atlantic by ensuring that the much needed U.S. supplies, lend-lease etc were being safely shepherded across the Atlantic from their US producers to the British, American and Russian users.On being relieved on board by a younger rating, we senior engineering ratings were urgently required to take diesel courses on Gray Marine or General Motors diesels for what was then a very “hush hush job”. Can you imagine my great surprise when I was taken across the Atlantic and on arriving in the USA was sent to Boston to take over a Diesel D.E. But after awaiting at Frazier Barracks, Boston Navy Yard for a ship, I was suddenly hustled down to the Bethlehem Yard at Hingham Mass., to take over a Turbo Electric D.E.The first time I saw her on Monday morning she was doing her basin trials and on the following Thursday Oct 3 of that week she was commissioned with a British Naval crew. So you can imagine I was extremely busy and I had a young and in-experienced crew. She was mine and I had only three days in which to familiarise myself with a new and revolutionary type of propulsion for a Naval vessel, and we moved with the aid of a dockyard party from Hingham to Charleston Navy Yard, Boston, where we carried out a series of trials etc. However after losing around twenty pounds in weight in the first two months, the result of dashing up and down engine room and fireroom ladders to prevent disasters happening in those compartments due to the greenness and inexperience of the crew most of whom have never been to sea before. However before we left the U.S. we managed to settle down and lick the job and turned into a great team in the black gang of this ship.Now after almost two years in commission we have quite a useful record to our account, we have sunk two confirmed U-Boats and whilst a ship in the 1st Escort Group under Commander Clive Gwinner D.S.O., D.S.C., R.N., quite a renowned U-Boat sinker we helped in the location and sinking of other U-Boats.From D-Day and until the occupation of Brest and Cherbourg peninsulas we carried out anti-U-Boat patrols and sweeps on these areas in fact we have been under German gun fire from the long range guns on Alderney, one of the Channel Islands. Then a long spell of anti-U-Boat sweeps and protection of convoys in the approaches to the English Channel. During the midget submarine attacks we were moved right up into the Channel and were working with the Cross Channel convoys of LSTs etc to Cherbourg and Le Havre. Then to crown our efforts in anti U-Boat patrols U776 surrendered to us shortly after the capitulation of the German land forces.Well Sir as I have mentioned before I have been privileged to attend two unique and historic ceremonies; (1) seeing the Stars and Stripes hauled down on USS Aulick and the White Ensign run up on HMS Burnham, Oct 8 1940, (2) the commissioning of a British Naval ship built in an American ship building yard and the White Ensign run up on HMS Balfour at Hingham, Mass. Oct 7th 1943.So now I come to the story of my great disappointment, we have just got the signal to proceed to a port where we will hand back HMS Balfour to the U.S.Navy. That completes the cycle and ceremony (3) of hauling down the White Ensign on HMS Balfour and running up the Stars and Stripes on USS ?. To my everlasting disappointment it means that the hopes I had of taking her back to the U.S.A. and telling my Boston Navy Yard friends of our exploits etc during our two years in commission in the dangerous waters of the Atlantic and English Channel are doomed to disappointment.Hoping to have a reply from you with your signature however short, as I would treasure it as a great addition to my Anglo-American trophies and photographs etc of this War.Yours sincerelyDavid McGarva, C.E.R.ABackground and some photos from Destroyers for Great Britain by Arnold Hague, ISBN 0–87021–782–8Also Warships of WWII by H.T. Lenton & J.J. Colledge ISBN 0–7110–0403-X

Let me invite you on a journey around the world: From the high streets of London … to Zhengzhou, a booming Tier II/III city in China … to Apple’s corporate headquarters in sunny California … to the Emerald Isle … and finally back here to Lower Manhattan.As we travel on this journey, I will try to explain how the money flows from that point-of-sale purchase to my brokerage account when the company pays out its quarterly dividend.This journey is interesting because it helps shine a light onto the increasingly complex and globalized world in which we live.(1) Retail — the Apple StoreI walk into the Apple Store on picturesque Regent Street in London’s posh Mayfair district. 15 minutes later, I stroll out with a base-level 64 GB iPhone X for £999[1].The money starts to flow as soon as I successfully input the PIN for my Barclaycard into the payment terminal:The U.K. has a 20% value-added tax[2] (similar to a sales tax in certain states in the U.S.) which means £167 comes right off the top to fund government and public expenditures.Since the iPhone was purchased with a credit card, another 3% or so is taken out by the payment processing companies, leaving the retail operation with a net total of £803 collected. If I had paid with cash, there would be some indirect cash handling expense that the retail operation would absorb (probably higher than 3%).For illustrative purposes, let’s say that Apple targets 20% retail margins to cover the costs of its beautifully designed Apple Stores. This means that the store is allocated about £161 per iPhone to pay for that expensive Regent Street rent, store employee salaries, Apple Geniuses, utilities, depreciation on the store’s capital improvements, etc.This leaves £642 that ultimately flows to Apple’s UK entity.(2) Manufacturing — A Globalized Supply ChainNow we need to hop on a Cathay Pacific flight from London to Hong Kong with a quick layover before transferring to a Dragon Air flight to Zhengzhou, a city in China that is about the size of New York City’s five boroughs … that many of you have probably never heard of.Don’t worry, though. These days even the locals simply refer to it as “iPhone City”.Zhengzhou is the capital of the densely populated, relatively impoverished Henan Province whose industrial economy had historically been centered around light textiles and food processing. Situated at the transition between the North China plain and the Qinling mountains, it is about a 4–5 hour (around 900 km) high-speed train ride from Shanghai.This is where Apple’s Taiwanese contract manufacturing partner Foxconn decided to locate its second major industrial operation after its main Shenzhen complex. With generous support from the local government, Foxconn spent hundreds of millions of dollars building out factory operations in an area that was specifically set up to export consumer electronics. For example, it is located in a “special bonded zone” that is legally considered foreign soil under Chinese regulation (doing it this way helps makes the logistics more efficient).In August 2010, the first lines at Foxconn’s Zhengzhou factory began production[3]. A little over eight years later, it produces around half of all of the iPhones in the world, churning out upwards of 500,000 per day.Along with 350,000 employees who work at the factory (during peak times), tens of millions of components from all around the world and other regions in China stream into Foxconn’s Zhengzhou factory on a daily basis. Many of the semiconductor components are designed in one part of the world only to have their ECAD designs[4] electronically transmitted to Taiwan’s chip foundries for fabrication.Here is a summary of how the bill of materials (BOM) breaks down:My recently purchased base-level 64 GB iPhone uses an estimated $370 worth of materials and components[5]. Adding in around $35 in assembly and logistics costs and we are looking at a total BOM cost of around $405.The biggest cost item is the OLED display from Samsung, making up around 27% of the BOM. This is because Samsung is the dominant supplier of advanced OLED screen technology and is able to command premium prices[6]. It is also why Apple is pushing so hard to foster greater competition in the industry[7].Another notable component is the RF chipset supplied by Qualcomm. While a relatively modest 4% of the BOM, what is not included in the table above are additional 4G licensing fees that are paid separately by Apple. I’ll come back to this in the next section.Many of the other discrete analog and digital semiconductor components primarily supplied by U.S., German and Japanese fabless semiconductor designers are often fabricated in chip foundries in Taiwan (e.g. TSMC).Notably, China’s value-add to the BOM is relatively low and mainly comprised of more labor-intensive elements or less advanced components like the lithium-ion battery, packaging or simple accessories like the standard white Apple headphones. Overall I estimate China’s contribution to the BOM at around 13%.Okay, we’ve spent enough time in the “iPhone City”. We now need to catch our Air China flight from Zhengzhou to San Francisco via Beijing. We are heading to Silicon Valley.(3) Corporate — One Apple ParkThis is where the magic happens.Apple’s recently opened new headquarters[8] occupy 2.8 million sf in Cupertino, in the heart of Silicon Valley. Built at a construction cost of around $5 billion, it houses 12,000 highly compensated[9] employees.It is here (well, technically nearby at the old Apple Campus) that the iPhone and other Apple products were conceived and designed. It is where corporate executives like Tim Cook make big decisions about the next versions of existing product lines, the next advertising campaign, or how the company should allocate the product development dollars.And this is where — at this very moment in late 2018 — executives are likely debating whether it makes strategic and financial sense to diversify Apple’s manufacturing base outside of China by setting up another “iPhone City” in places like Vietnam[10].These corporate expenses are primarily fixed costs that you can amortize across the entire global revenue base of the company. As an example, in FY2018, Apple’s R&D expenses totaled $14.2 billion, or 5.4% of revenue. If we break it down on a per-unit basis, this comes out to something like $41 per iPhone sold [see Note i]:Between the £642 ($813) that flows into Apple’s UK corporate entity and the $405 BOM, you have $407 that flows back to Apple Inc. This money will be used to pay for:Corporate costs including sales and marketing, product development and general and administrative costsThese costs are mostly comprised of employee compensation, whether in the form of salary, bonus or stock-based compensation.Rent for all of the leased office space around the world; maintenance and depreciation for its owned properties.Spending is heavily concentrated in Cupertino/California although Austin, Texas[11] is rapidly turning into Apple’s version of “HQ2”[12].Apple also spends heavily on brand advertising.Global licensing fees / QualcommAs I alluded to above, Qualcomm is entitled to collect royalties on any device that connects to a 3G or 4G network (which includes basically all smartphones).This is because of patents and intellectual property that it created (and acquired) over the years, primarily around a “channel access method” called code-division multiple access (CDMA) on which almost all modern wireless standards are based today.Moreover, the licensing agreements that it negotiated many years ago stipulate that it collects a percentage of the entire “final sale” price of the smartphone — so as these devices have gotten more complicated (and more expensive) over time, Qualcomm has collected more revenue.As you might imagine, this is causing a lot of friction along a number of fronts — many companies are questioning why Qualcomm should collect the same percentage (or any percentage at all) on peripheral components that have nothing to do with wireless.This is one of the primary reasons why so many other companies are focused on building their own IP portfolios for the next generation of wireless standards (5G). This article from Macro Polo[13] discusses the whole saga in detail and I would recommend reading it if you have time.In any case, what this means for Apple is that it has to pay 3.5% of the final sale price of the iPhone to Qualcomm (with “final sale price” capped at $400 to $500[14]).After paying off all of its corporate expenses and (reluctantly[15]) cutting a massive check to Qualcomm, there is $281 left. This equates to 27% of the net revenue collected on Regent Street. Apple’s overall operating margin is 27% … so this passes the sanity check [see Note ii].(4) The Tax Man“We all know this deal is as certain as death and taxes.” — from Meet Joe Black, one of my all-time favorite movies.Apple is enormously profitable. In its last fiscal year (FY2018: 12 months ending 9/30/2018), it generated $72 billion of earnings before taxes. That is $72 followed by 9 zeroes. And the Tax Man is salivating at the sight of all of that taxable income.Historically, the U.S. corporate tax rate was 35%. Under the 2017 Tax Cuts and Jobs Act, the corporate rate was lowered to 21%. Including state-level corporate taxes, the average corporate tax rate is 26%[16]. Apple is a U.S. company headquartered in California, so all we have to do is multiply the $72 billion by 26% and call it a day, right?Wrong.In FY2018, Apple provisioned $13.4 billion in corporate income taxes, which comes out to an 18% effective tax rate. That’s 8% lower than the prevailing rates. How is this possible?The reason is that tax rates are different all around the world, so multi-national corporations (and their accountants) are always trying to figure out how to legally lower the amount of taxes they have to pay. For uber-profitable companies like Apple, the stakes are massive — each 1% reduction in your effective tax rate is $700 million of additional net income.Technology companies are especially good at this, because much of what they are selling is “intangible” (i.e. software, intellectual property, etc.) and they also tend to sell globally which means the flexibility of multiple tax jurisdictions to play with. So even though the IP assets that Apple develops are mostly created in Cupertino and the United States, from a legal and tax perspective, the IP is actually located outside of the country.This is why instead of flying to Washington, D.C. where the IRS’ headquarters are located, we are now boarding an Aer Lingus flight to Dublin, Ireland.Photo: Sharp Magazine: The Travelling Man — Dublin, IrelandIn the aftermath of World War II, while most of Western Europe boomed on the back of the Marshall Plan and post-war reconstruction, Ireland was held back by its “economic nationalism” resulting high tariffs and import substitution policies. Its economy stagnated and the country entered the 1980s with high levels of public debt, 20% unemployment and a public sector that accounted for a third of the workforce[17].Economic reforms starting in 1987 led to reduced public spending, lower taxes and increased competitiveness — especially for global capital. The government made a major effort to lure technology companies such as Intel and Microsoft. In the 1990s, its economy finally began to pick up and soon people were talking about Ireland as the “Celtic Tiger”[18]. In less than three decades, Ireland went from being one of the poorest countries in Western Europe to one of its wealthiest.One of the areas that helped Ireland attract so much foreign investment was favorable tax policy. Without getting into the details[19], Ireland enacted policy that made it possible for companies to shift profits on intangible assets like software and patents from higher-tax locations to lower-tax ones. For global technology companies like Apple, this is the main reason why its effective tax rates are so much lower than the prevailing tax rates of its primary tax domicile in the United States.And this is the reason why wee little Ireland features so heavily in Apple’s annual report[20]:When Apple sells its products overseas, the vast majority of the profits remain offshore. Bringing this cash onshore would require Apple to pay something called a “repatriation tax” to the IRS. Leaving it offshore means that it can delay its payment. Instead, this cash can be used for overseas acquisitions, or perhaps they can wait for the U.S. government to issue periodic “repatriation holidays” to try to coax that money back home. But more often than not, the offshore cash is parked in government and corporate bonds [see Note iii].Out of approximately $257 billion in cash (and equivalents, including bonds) held by Apple, about 93% of it is sitting offshore[21].In any case, the corporate income taxes that Apple does pay — mostly from profits on its U.S.-generated revenue — comes out to about $39 per iPhone. This leaves $243 in after-tax profits.(5) The ShareholdersTime to head home. I hop on a United flight from Dublin to John F. Kennedy Airport. I head home, fire up my PC, log onto Quora on one screen and my trading platform on another.This is where we wrap up our journey following these money flows around the world.The $243 in after-tax profits belongs to the bondholders and equityholders in the company. More accurately, nearly all of it ends up with the equityholders.Let’s start with the bondholders: Apple has about $115 billion in outstanding bonds that pay lower rates than the U.S. government (less than 3%). It pays out about $3.2 billion in interest expense, which is actually more than offset by over $5 billion it earns from interest income on all of its offshore bonds.Now some of you might be wondering why such a profitable company like Apple needs to issue bonds. This is where we turn our attention to the shareholders (disclosure: I am one of them).The reason is because Apple wants to return capital to shareholders by repurchasing its shares. However, to repurchase its shares, it needs to use onshore cash and as we learned above, getting that offshore cash onshore means paying the repatriation tax.But some enterprising investment bankers figured out a while ago that instead of repatriating the cash, Apple could come up with the cash by issuing onshore bonds that are indirectly collateralized by all of that offshore cash (and all of the other assets of the business). Because it’s Apple, the interest rates are almost negligible. Now Apple can take this newly raised onshore cash and buy back its shares without having to pay the repatriation tax.On top of share buybacks, Apple pays dividends on a quarterly basis. In FY2018, Apple paid out close to $14 billion in dividends. November 8th, 2018 was the most recent ex-dividend date for Apple shareholders[22]. The cash showed up in my brokerage account a week later. For every share you held prior to that date, Apple paid out 73 cents.Since announcing its original Capital Return program in 2012[23], Apple has returned approximately $249 billion to its shareholders via share buybacks and $74 billion via dividends. These share buybacks have allowed Apple to reduce the number of shares outstanding by 25% since 2012. This creates value for shareholders because it means that one share you hold today entitles you to a much larger share of future profits than one share that you held back in 2012 (split-adjusted, of course).The vast majority of Apple shares are held by Americans, either directly or indirectly via index funds, mutual funds, hedge funds or their pensions. This means that Americans have disproportionately benefited from the enormous amount of value created (and partially returned) by Apple over the years.SummaryThank you to the brave few that have stuck with me on my journey all the way to the end. Your reward is the last, and most important table — how all the various money flows get split up by country:As you can see very clearly, the United States takes the highest share of economic value-add. This is even in the scenario we imagined above where the iPhone is sold overseas (i.e. the U.K.) in a jurisdiction that charges relatively high consumption taxes.For iPhones that are sold here in the United States, the fraction of economic value-add that circulates back into the American economy is over two-thirds once you factor in the retail operations.Think about that for a minute: Apple has 132,000 employees (note: this figure includes many lower-paid retail workers), many of whom are located overseas. Yet the American economy is able to capture over 70% of the economic value of an iPhone. Foxconn has well over a million people in China working to assemble iPhones and other Apple products — yet is only able to capture 13% of its value. Let’s keep this in perspective next time we hear complaints about how advanced economies are getting “screwed over” by globalization.Finally, one of the big ironies is despite the massive surplus value that Apple clearly creates for the American economy, the way that global supply chains and international trade accounting work, Apple products actually add to our bilateral trade deficit with China[24]. This is why it is so important to understand how the money flows really work — so that you can avoid enacting trade and other policies that can end up completely backfiring.Explanatory Notes[Note i] The average ASP per iPhone sold was $766, not the £999 retail price. 5.4% of $766 is $41.[Note ii] On top of hardware sales, Apple also collects significant ancillary revenue: its 30% cut of iOS apps and in-app purchases, search fees from Google[25], etc. Operating margins on iPhones sold in the store should also have slightly lower margins than those sold online due to lower overhead costs. Finally, margins on iPhones are typically higher than margins on iPads, Macs and other Apple hardware products.[Note iii] With the passage of the Tax Cuts and Jobs Act of 2017, changes in the tax system have reduced the disincentive for companies to repatriate taxes back to the United States[26]. Following this, Apple announced that it was going to start repatriating its cash over an 8-year period[27]. While it seems likely that this change the onshore/offshore cash dynamic, history has shown how the amazing creativity of investment bankers and accountants when it comes to creating new and sophisticated tax structures.Footnotes[1] iPhone Xs UK release - Best deals, prices and how to pre-order new Apple flagship[2] VAT rates[3] How China Built ‘iPhone City’ With Billions in Perks for Apple’s Partner[4] Electronic design automation - Wikipedia[5] IHS Markit Teardown Reveals What Higher Apple iPhone 8 Plus Cost Actually Buys[6] Samsung's OLED iPhone display supply dominance challenged[7] China breaks into Samsung's OLED dominance[8] Apple Park - Wikipedia[9] How Much Is The Average Salary Of An Apple Employee? | Cult of Mac[10] Glenn Luk's answer to Is Vietnam likely to implement the economic system that China currently uses and the Asian Tigers as well as Japan formerly used?[11] Apple is spending $1 billion on a new campus in Austin[12] How did NYC woo Amazon to Long Island City?[13] From Windfalls to Pitfalls: Qualcomm’s China Conundrum - MacroPolo[14] Qualcomm's patent deals aim to ease Apple, regulator tensions, exec...[15] Chinese court upholds Qualcomm's complaint that Apple infringed on two patents[16] US Corporate Income Tax Now More Competitive | Tax Foundation[17] Economy of the Republic of Ireland - Wikipedia[18] Celtic Tiger - Wikipedia[19] Ireland as a tax haven - Wikipedia[20] https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf[21] Are you a robot?[22] Apple Inc. (AAPL) Ex-Dividend Date Scheduled for November 08, 2018[23] Apple Announces Plans to Initiate Dividend and Share Repurchase Program[24] Glenn Luk's answer to What can the US do to bring back 25% of the manufacturing being outsourced in China right now in 10 years?[25] Google is paying Apple billions per year to remain on the iPhone, Bernstein says[26] Evaluating the Changed Incentives for Repatriating Foreign Earnings[27] Apple's plan to repatriate $285 billion in cash to the US could be a big boost for investors

Selected Interview QuestionsCandidate: 00101.Why you are willing to join in a bank?I am willing to join in a bank since I hope that I may be having more opportunities to serve the public. Banks have better career opportunities by means of periodical promotions to higher cadre.02.What do you mean by appraisal of gold loans?Gold loans are granted against the security of gold jewellery namely gold chains, necklaces etc., The jewellery apart from gold contains certain amount of copper and stones. Appraiser is a person well versed in the art of appraising the jewellery and on appraisal of the jewellery, he will be finding out the approximate gold content so that the bank may be able to provide loans against the gold content.03.What are the different kinds of term deposits available in a commercial bank?The different kinds of term deposits available in a commercial bank are – fixed deposit, recurring deposit and reinvestment deposit. In the case of fixed deposit, a fixed amount is accepted for a definite period and interest is paid on quarterly basis. In the case of reinvestment deposit which is similar to fixed deposit, interest is paid on maturity since interest is reinvested. In the case of recurring deposit, monthly instalments are accepted for a fixed period.04.What is the minimum period for which a fixed deposit is accepted and the maximum period for which a fixed deposit is accepted?The minimum period for which fixed deposit is accepted is seven days and the maximum period is ten years.05.Whether a fixed deposit can be accepted for a period more than ten years?In the case of deposits in the names of minors on account of settlement of claims, the deposit can be for more than ten years06.What do you mean by FERA?FERA means foreign exchange regulations act and it came into effect from the year 1973. An act to regulate certain payments dealing in foreign exchange, securities, the import & export of currency and acquisition of immovable property by foreigners. Under Section 31 (1) of the Foreign Exchange Regulation Act ( FERA) of 1973, it is mandatory for foreign corporations, which are not incorporated in India to obtain permission from the Reserve Bank Of India (RBI) to acquire, hold, transfer or dispose off in any manner (expect by way of lease for a period not exceeding five years) any immovable property in India.07.What do you mean by ECS?ECS means electronic clearing service and the customer can authorize on periodical basis to make payment of certain utility bills like electricity charges, water charges etc., by debiting his account till such time he submits a revocation letter. Similarly, he can authorize corporate to credit the dividends on shares and interest on debentures as and when due to the credit of his account with the bank.08.What is the minimum amount that can be sent through RTGS?The minimum amount that can be sent through RTGS is Rupees two lakhs and there is no maximum limit09.What is the maximum amount that can be remitted through NEFT?There is no or maximum limit for remittances sent through NEFT10.What is the maximum amount that can be sent abroad by any resident individual?Under liberalized remittance scheme, all resident individuals including minors are allowed to freely remit an amount upto US dollars 250000 (or its equivalent freely convertible foreign currency) per financial year11..What is the name of apex bank which is responsible for the development of agriculture in the country?NABARD is the apex bank which is responsible for the development of agriculture in the country.12.What are the different kinds of schemes available in our country aiming towards poverty alleviation?National old age pension scheme; Jawahar Gramin Samruddi Yojana; National Family Benefit scheme; Mahatma Gandhi National Rural Employment Guarantee Scheme; National Maternal Benefit Schemel Annapurna etc.,13.What do you mean by crossing of any cheque?Writing of two parallel transverse lines drawn on the face of the cheque on top left hand corner with or without any words between the lines is known as crossing and it is for the purpose of making payment of the cheque through an account in the name of the payee or holder.14.What are the different kinds of crossing?Two parallel transverse lines drawn on the face of the cheque on top left hand corner of the cheque with any words or without any words is known as general crossing and the the payment can be made to the account of the payee or holder with any bank. In case the name of any bank is mentioned within the two parallel lines, it is known as special crossing and in this case, the payment should be made to the account of the payee or holder with the bank mentioned in the crossing only and not to any other bank.15.What do you mean by CASA?CASA means current and savings and this is applicable to computerized branches linked under core banking solution16.Whose signature is available in Rs. 100/- currency note?The signature of RBI governor is available in Rs. 100 currency note17.What do you know by dividend?Dividend is the return available in the form of money for the investments made by the shareholders in the equity shares and preference shares of any company.18.Bank holidays are declared according to which act?Holidays for banks are declared according to Negotiable Instruments act 1881 by the respective state governments in their states. However, all Sundays, all second and fourth Saturdays have been declared as holidays apart from the holidays permitted for religious and national ceremonies.19.Banks are functioning according to which act?Commercial banks in the country are functioning according to Banking Regulation act 1949 and to some extent as per Reserve Bank of India act 193420.RBI is functioning in the country as per which act?Reserve Bank of India is functioning according to Reserve Bank of India act 1934.Candidate: 00201.What do you mean by a guarantee?Guarantee is an undertaking executed by one person called as guarantor in favour of another person called as beneficiary expressing his intention to make payment in the event of failure of the principal debtor on payment of a debt or failure to perform any contract within the stipulated time or according to the terms of the contract.02.What are the different types of guarantees?The different types of guarantees are financial guarantee, performance guarantee and deferred payment guarantee03.What do you mean by letter of credit?Letter of credit is an undertaking executed by one banker on behalf of its customer to honour bills and documents drawn by another person as per the terms and conditions as mentioned in the letter of credit04.What do you know by packing credit advance?It is the preshipment advance granted by one bank to the exporter for the purpose of procuring raw materials; payment of various duties like customs duty, excise duty; packing charges; shipment charges etc.,05.What do you mean by special crossing?In case the name of any bank is mentioned within the two parallel lines, it is known as special crossing and in this case, the payment should be made to the account of the payee or holder with the bank mentioned in the crossing only and not to any other bank.06.What do you know by IFSC code ?IFSC means Indian Financial System Code and this is one alphanumeric code consisting of eleven digits of which the four alphabetic digits represent the name of the bank mentioned in abridged form and the next zero is known as control number and the last six numeric digits represent the branch code of the bank.07.Which is called as mother of deposits?Savings deposit is known as mother of deposits. Normally the first time customers will be advised to open savings deposits with the bank branch before availing any other facility with the bank08.Who is a called as natural guardian?Bother mother and father are known as natural guardian for the purpose of opening accounts in the name of minors represented by the guardian.09.Whether grandfathers and grandmothers can be natural guardians?Grand fathers, grandmothers grand grandfathers or grand grandmothers cannot represent as natural guardians on be behalf of the minors10.Which type of credit facility is available to a farmer for raising crops?For raising crops, the farmers are provided with crop loans, Kisan Credit Cards etc.,11.What do you mean by NULM?National Urban Livelihoods Mission (NULM) was launched by the Ministry of Housing and Urban Poverty Alleviation (MHUPA), Government of India in 24th September, 2013 by replacing the existing Swarna Jayanti Shahari Rozgar Yojana (SJSRY).The NULM will focus on organizing urban poor in their strong grassroots level institutions, creating opportunities for skill development leading to market-based employment and helping them to set up self-employment venture by ensuring easy access to credit. The Mission is aimed at providing shelter equipped with essential services to the urban homeless in a phased manner. In addition, the Mission would also address livelihood concerns of the urban street vendors12.What do you mean by Gram Sadak Yojana?The Pradhan Mantri Gram Sadak Yojana called as PMGSY was launched by the Government of India for the purpose of providing connectivity to unconnected habitations as part of a poverty reduction strategy. Government of India is endeavouring to set high and uniform technical and management standards and facilitating policy development and planning at state level in order to ensure sustainable management of the rural roads network.13.What are the salient features of MGNREGA?MGNREGA is known as Mahatma Gandhi National Rural Employment Guarantee act and according to this employment is guaranteed at least one person per household in rural areas. It aims at enhancing the livelihood security of people living in rural areas by guaranteeing hundred days of wage employment during each financial year to a rural household whose adult members volunteers to undertake unskilled manual work14.Which authority is supervising the functions of insurance companies?IRDA – Insurance Regulatory and Development Authority is the authority responsible for supervising the functions of insurance companies in our country15.What is meant by IPO?IPO means initial public offer and this is the first time public offer of equity shares, preference shares or debentures to the public for subscription16.What is meant by ASBA?ASBA means applications supported by blocked amount. Nowadays investors are permitted to remit the amount through ASBA demand drafts drawn in ASBA accounts for the purpose of subscribing shares or debentures through initial public offer and further public offer. When the demand draft is issued, instead of debiting the amount in the account, the amount is blocked till such time the shares or debentures are allotted. On allotment, the entire amount is debited; in the case of partial allotment, the amount is debited equivalent to the value of allotment and in the case of non allotment, the entire amount is allowed for further use. For the intervening period, the depositor earns interest as applicable to the category of deposits.17.What is meant by Performance guarantee issued by any commercial bank?In the case of contracts in favour of governments, the contractors are in a position to provide a bank guarantee by a reputed commercial bank, thereby undertaking to guarantee the government department to compensate the loss on account of failure of performance of the contract by the contractor within the due date or failure to perform the contract as per the terms and conditions of the contract. This is known as performance guarantee.18.What do you mean by packing credit facility issued by any commercial bank?Packing guarantee is known as preshipment advance provided by the commercial bank to the exporter for the purpose of procuring raw materials, packing materials or making payment towards customers duty, excise duty, transportation charges etc.,19.What do you mean by notice money?Notice money is money borrowed for a period of two days and more and upto fourteen days in the call money market.20.Treasury bills are issued by which authority and what are the different kinds of treasury bills available in the country?Treasury bills are issued by central government and state governments for the purpose of mobilizing funds from the public and others towards meeting the cost of various projects. There are three kinds of treasury bills as at present namely – 91 days, 182 days and 364 days. 91 days treasury bills are issued each Friday and the notified amount is Rupees one hundred crores. 182 day treasury bills are issued during alternative Wednesdays which is non reporting week and the notified amount is Rupees 100 crores and 364 days treasury bills are issued on alterntive Wednesdays which is a reporting week and the notified amount is Rupees 500 crores.Candidate: 00301.What do you know by PIN number?PIN number is four digit number expressed in numerical characters. PIN number is used for the transactions done using debit cards and credit cards through automated teller machines and point of sale terminals.02.What do you know by PAN number?PAN number is known as permanent account number. This is used for the purpose of remittance of income tax with income tax department. Tax payers should get one PAN number by sending an application along with relevant documents and by payment of specified sum of money to Income tax department or their agencies. It is ten digit number consisting and alphapetical and numerical characters.03.What are the functions of DICGC?DICGC means Deposit Insurance and Credit Guarantee Corporation and this corporation provides deposit insurance upto an amount of Rupees one lakh per depositor per bank in the event of insolvency of the bank and it also provides small loans guarantee upto certain limits04.What is the role played by ECGC?ECGC provides guarantee support to the exporters of the country in the form of several export guarantees05.Mention the Regional Rural Banks which are functioning in Tamilnadu?The Regional rural banks which are functioning in Tamilnadu are Pandiyan Grama Bank and Pallavan Gramin Bank. Pandiyan Grama Bank has been sponsored by Indian Overseas Bank and pallavan Gramin Bank has been sponsored by Indian bank.06.What do you mean by Mergers and what are the different kinds of mergers?When two independent units merge together to form a single unit, it is known as merger. The mergers can be vertical merger, horizontal merger, reverse merger, consolidation, amalgamation etc.,07.What do you mean by horizontal merger and reverse merger?When the business functions of two units are identical in nature and when the merger takes place between those units, it is known as horizontal merger. New Bank of India merged with Punjab National Bank and both are banking organizations. Industrial Credit and Investment Corporation of India Limited was instrumental in establishing ICICI bank as per LPG norms and subsequently Industrial Credit and Investment Corporation Limited merged with ICICI Bank and when a parent unit gets merged with an ancillary unit, it is known as reverse merger.08.Which are the top two private sector banks in our country?The top private sector banks in our country are HDFC bank limited and ICICI bank limited09.Whether housing loan is a priority sector advance and if so, upto what amount?Housing loans granted are treated as priority sector advances subject to certain conditions. Loans to individuals up to Rupees 28 lakh in metropolitan centres (with population of ten lakh and above) and loans up to Rupees 20 lakh in other centres for purchase/construction of a dwelling unit per family, are eligible to be considered as priority sector provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed Rupees 35 lakh and Rupees 25 lakh, respectively. Housing loans to banks’ own employees are not eligible for classification under priority sector.10.Whether educational loan is a priority sector advance?Loans to individuals for educational purposes including vocational courses upto Rupees 10 lakh irrespective of the sanctioned amount are eligible for classification under priority sector.11.What do you mean by micro, small and medium enterprises?The classification is based on original investment in plant and machinery: For micro enterprises, upto Rs. 25 lakhs for manufacturing units and Rupees 10 lakhs for service units; For small enterprises, for manufacturing units above Rupees 25 lakhs and upto Rs. 5 crores and for service units above Rupees 10 lakhs and upto Rupees 2 crores; For medium enterprises, for manufacturing units above Rupees 5 crores and upto 10 crores and for service units above Rupees 2 crores and upto Rupees five crores12.What do you mean by KYC and name any two important documents which are obtained as per KYC?KYC means know your customer guidelines and these guidelines were prescribed by RBI for new customers who are willing to open accounts with commercial banks and according to KYC, any new customer who is willing to open accounts with commercial banks should submit the photocopy of anyone of the following namely; driving licence, voter id card, AADHAARA card, passport as address proof and photocopy of anyone of the following namely; driving licence, voter id card, AADHAAR card, passport, pancard as identity proof. KYC is antimony laundering device.13.What is the present repo rate and reverse repo rate?The present repo rate is 6.25% and reverse repo rate is 5.75%14.In the case of MICR code, the middle three digits represent what?MICR code consists of nine numerical digits and the middle three numerical digits represent bank name15.PAN number consists of how many alpha characters?PAN number consists of ten digits. The first three alpha characters are random alphapetical characters between AAA to ZZZ; next one alpha character represents the category of the cardholder; the next one alpha character represents the first character of the name of the cardholder; the next four numerical digits are auto generated sequential numbers and the last one single alpha character is a check digit.16.What do you know by biometric automated teller machines?In the case of automated teller machines, the four digit numerical PIN number is used for performing transactions using debit card and credit card. In the case of biometric automated teller machines, instead of PIN numbers, anyone of the following body parts is used – left hand thumb impression; eye retina and voice recognition. In India, the left hand thumb impression is the accepted mode and these kinds of automated teller machines are known as green label automated teller machines.17.What is the criteria by which a bank is considered as largest bank?For the purpose of ranking, a bank is considered to be largest or smallest taking into consideration the business position of the bank; namely – the total deposits and total advances as at the end of March each year.18.What do you mean by commercial paper?Commercial papers are issued by well rated organizations for mobilizing funds from the public and other corporate. They are issued at a discount and they are freely negotiable by endorsement and delivery. The minimum maturity period is seven days and the corporate should have earned credit rating equivalent to P2 issued by CRISIL19.What do you mean by FCNR?FCNR means foreign currency non resident accounts. Non resident Indians and Persons of Indian origin are eligible to invest in this deposit. It is a term deposit accepted in the currencies – US dollar, Sterling Pound, Euro, Japanese Yen, Canadian dollar and Australian dollar. The minimum period of deposit is one year and the maximum period is five years and the deposit is held in foreign currencies and the interest earned is free from income tax.20.What do you mean by Escheat?He is a person who dies without leaving any legal heirs and in this case, his estate will revert to the state government.Candidate: 00401.What do you mean by money laundering?Using the banking channel for the purpose of bringing illegal money is known as money laundering.02.What do you mean by subprime lending?Mass lending by commercial banks to the borrowers without ascertaining the credit worthiness of the borrowers03.What is meant by LPG and who is responsible for introduction of LPG strategy in our country?LPG means liberalization, privatization and globalization and this was coined by Dr. Manmohan Singh, the then finance minister of our country. The salient highlights of the Liberalisation, Privatisation and Globalisation Policy in India are: Foreign Technology Agreements; Foreign Investment; MRTP Act, 1969 (Amended); Industrial Licensing; Deregulation Beginning of privatization; Opportunities for overseas trade; Steps to regulate inflation; Tax reforms; Abolition of License -Permit Raj04.What do you mean by PURA?PURA means providing urban amenities in rural areas. This concept was coined by Dr. A.P.J. Abdul Kalam, the then president of India.05.What do you know by current ratio?It is one equation between current assets and current liabilities. This ratio provides the liquidity position of the organization. When the ratio is more than one it is known as positive current ratio and the unit is having sufficient working capital and when it is less than one, the unit is found to have more current liabilities than current assets and the liquidity position is found to be very weak.06.What do you know about negotiable instruments act?In India, the negotiable instruments act was passed during 1881 which came into force with effect from March 01, 1882. Negotiable instruments means and include promissory note, bills of exchange and cheque payable to order or bearer. Promissory note, bill of exchange, cheque and demand draft are negotiable instruments.07.What do you know by MICR?MICR means magnetic ink character recognition. MICR code is available in MICR bank at the bottom of the cheque or demand draft. It consists of nine numerical digits of which the first three digits represent the centre/city; the middle three digits represent the bank and the last three digits represent the branch of the bank.08.When it comes to rural lending, which are all considered to be priority sector advances?When it comes to rural lending, the loans granted to the following are considered to be priority sector advances – Loans granted to all agriculture related activities; self help group; Differential rate of interest; Loans to SC/ST beneficiaries; Loans provided to doctors for setting up clinics in rural areas; Loans to dealers in fertilizers and pesticides; loans to dealers of springler irrigation and drip irrigation equipments etc.,09.Who is called as an authorized dealer?Authorised dealer is at present known as authorized person. Authorised person is an individual or organization permitted to deal in foreign exchange business in the country.10.What do you know by financial inclusion?Financial inclusion means the following: Providing formal banking services to poor people in urban and rural areas; Promoting the habit of money savings, insurance, pension-investment among poor people; Helping the people in getting loans at reasonable rates from commercial banks so that they do not become victims to local moneylenders11.What are the important initiatives taken through financial inclusion in the country?The following are the important initiatives taken through financial inclusion in our country: Lead banking scheme; No frill accounts; Basic savings bank deposit accounts; JANDHAN accounts; business correspondent and business facilitator facilities; Swabhiman campaign;12.What do you mean by MCLR?MCLR replaces the base rate system. RBI introduced the system with effect from 01.04.2016 in order to determine the base rate by commercial to improve the efficiency of monetary policy transmission. All rupee loans sanctioned and credit limits renewed with effect from 01.04.2016 to be priced with reference to MCLR and it will be an internal benchmark for the banks. It consists of marginal cost of funds, negative carry on account of CRR, operating costs and tenor premium. The marginal cost of funds consists of two components namely; marginal cost of borrowings and return on networth13.What are the major money market instruments?Certificate of deposits; Commercial paper; Inter Bank participation certificates; iner bank term money; Treasury bills; Bills rediscounting and call/notice money14.What are the differences between NEFT and RTGS?Both are two categories of online remittance facilities through CBS enabled branches of commercial banks. The minimum balance that can be sent through RTGS is Rupees two lakhs whereas in the case of NEFT, there is no such limit. The beneficiary gets his funds at real time and it means instantaneously without any loss of time. In the case of the beneficiary gets his funds in between batches15.Who is deciding the rate of interest for savings deposit accounts?Rate of interest for savings deposits is decided by respective commercial banks only and RBI has permitted full freedom in this connection.16.Who cannot open savings deposit accounts?Proprietorship concerns, partnership firms, limited liability partnership firms, private limited companies and public limited companies are not permitted to open savings accounts17.What is meant by memorandum of association?Memorandum of association is the parent document for any company whether it is a private limited company or private limited company. It contains the details of formation of the company, policies, objectives, registered office and more.18.What is known as power of attorney?Power of attorney is an authorization given by one person called as principal in favour of another person called as an agent authorizing the agent to perform certain activities on behalf of the principal and it can be specific power of attorney or particular power of attorney.19.In which currencies FCNR accounts can be opened in our country?FCNR account can be opened in the following currencies namely; US dollars, Sterling Pounds; Euro; Japanese Yen; Australian dollars and Canadian dollars.20.What are the differences between NRE and FCNR?NRE and FCNR accounts are opened by non resident Indians and Persons of Indian Origin in India. NRE accounts are to be opened in rupees whereas FCNR is opened in foreign currencies. NRE accounts can be opened in the form of savings account, current account, reinvestment deposit and fixed deposit whereas, FCNR account is permitted to be opened as fixed deposit or reinvestment deposit. NRE term deposits can be opened for a minimum period of seven days and maximum period of ten years. FCNR accounts can be opened for a minimum period of one year and maximum period of five years.Candidate: 00501.What do you mean by masala bonds?Masala bonds are the bonds issued for rupee denominated borrowings by Indian companies in overseas markets02.What do you mean by secondary market in our country?Secondary market pertains to capital market and it is also known as stock exchange or old issues market. Shares, debentures and bonds can be bought and sold from the stock exchange through registered brokers.03.What do you mean by fund based limits and non fund based limits?The loans provided to the borrowers in the form of term loans, overdrafts, cash credits and bills discounting limits are known as fund based limits since funds are released to the borrowers. Guarantees and letter of credits are non fund based limits since no funds are provided for the time being since they are contingent liabilities.04.What do you mean by off balance sheet items?Guarantees, letter of credits and bills sent for collection for which proceeds are yet to be realized are known as off balance sheet items05.What do you mean by closed ended scheme?This is one form of mutual fund scheme. Like initial public offer, the scheme is open for a certain period only and after which the public cannot invest their amount in the units under this scheme.06.What do you mean by open ended scheme?This is one mutual fund scheme and the units under scheme can be purchased and sold at any time07.What do you mean by overdraft facility granted by a bank?Overdraft is a facility granted by the banks towards meeting the working capital requirements of a borrower. This is provided by means of credit limit over and above the current account balance and the borrower has to pay the interest as and when due.08.What do you mean by collateral security?Collateral security is an additional security provided by the borrower in addition to the primary security. For example, in the case of vehicle loan, the car purchased out of loan is known as the prime security and the insurance policy obtained by the bank from the borrower for the sanction of this loan is known as collateral security.09.In regard to educating a customer, what are the different kinds of information boards displayed in a bank branch?The following boards are available in the bank branches – Working hours and business hours; Interest rates on various deposits; Interest rates for loans; Service charges; Time norms for various services; Details of schemes available in the branch10.Who is the present RBI Governor?The present governor of RBI is Shri Urjit Patel and he is functioning as the governor of RBI since 04th September, 201611.What do you mean by unclaimed deposits?The deposits which are not in operation for more than ten years are known as unclaimed deposits. For the purpose of this classification, the customer induced transactions are only taken into account.12.How many regional centres are available for RBI in the country?Reserve Bank of India has four regional centres at the following places – Chennai, Kolkatta, New Delhi and Mumbai.13.What do you mean by white label automated teller machines?The automated teller machines which are maintained and managed by non bank entities are known as white label automated teller machines. In our country TATA Indicash and Muthoot finance are having such machines installed at various centres.14.What are the advantages of CTS?CTS means cheque truncation scheme. This is used for clearing purpose. Normally commercial banks used to send the physical cheques through their15.What do you mean by certificate of deposits?Certificate of deposits are issued by scheduled commercial banks (except Regional Rural Banks) and all financial institutions within their umbrella limits. Individuals, corporate, companies, trusts, funds and associations can invest in certificate of deposits and they are issued for a minimum period of seven days and maximum period of twelve months in the case of commercial banks and in the case of financial institutions the minimum period is one year and maximum three years, Minimum amount for investment is Rupees one lakh and in multiples of Rupees one lakh.16.RBI is called by which names – mention four names?RBI is called by the following names – banker to banker; lender of the last resort; custodian of banks; banker to government;17.What do you mean by ways and means advances?Ways and means advances were introduced as per an agreement between Reserve Bank of India and Government and they are temporary overdraft facilities provided by RBI to central government and state governments and the purpose is to bridge the time interval of mismatch the government expenditure and receipts. The duration of the limit is ten days for central government and 14 days for state government departments.18.Who is banking ombudsman and by whom he is appointed?Banking Ombudsman is an arbitrary authority who resolves the complaints received from the customers of commercial banks in regard to bank related issues.19.What do you mean by EEFC account?Exchange Earner’s Foreign Currency account is an account maintained in an account maintained in foreign currency with an authorized dealer ; i/e/ a bank dealing in foreign exchange. Professionals, exporters, trainers etc., who are in receipt of foreign exchange for the services extended by them in foreign countries can invest the amount in EEFC account and the account will be in the form of current account and no interest is paid for the balance held in EEFC account.20.What do you know by NBFC?NBFC means non banking finance companies. It is a company registered under Indian Companies act 1956 and presently 2013 engaged in the business of providing loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire purchase, insurance business, chit fund business etc.,Candidate: 00601.What do you mean by arbitrage?It is the process of purchase of one security from one market and selling the same security for earning a profit at the same time at another market.02.What do you mean by Bonus shares?It is the free allotment of shares in certain proportion to the existing shares held by the shareholders of a company and this is a means of providing reward to the investors for their contribution to the growth of the organization by capital investment03.What do you mean by Bull?It is a term given to a speculator on stock exchange who buys the securities in expectation of a rise in the prices. The market is called as bullish when there is a domination of buyers over the sellers04.What is known as dematerialization?Dematerialisation is the process by which shares in the physical form are cancelled and they are issued in electronic form. The certificates are known as demat shares. This process eliminates the time and manpower involved in transfer and registration of shares from the seller to the buyer05.What do you mean by moorat trading?It is the auspicious trading on a special day, say Diwali during some specified hours.06.What do you mean by rights issue?It is the issue of new shares to the existing shareholders in a fixed ratio to those already held at a price which is generally below the market price of the old shares.07.What do you mean by futures?It is a standard contract issued on an agreement to buy or sell an asset at a certain price at a certain time in future. It is an obligation on the buyer to purchase the underlying instrument and the seller to sell it.08.What do you mean by forward?The forward is a contract that is traded off the stock exchange and it is self regulatory and has certain flexibility unlike future which are traded at stock exchange only and it do not have flexibility of quantity and quality of commodity to be delivered and these are regulated by Securities Exchange Board of India, Reserve Bank of India or other agencies.09.What do you mean by factoring?Factoring is an arrangement in which short term domestic receivables on sale of goods or services are sold to a company called as factor and this scheme came into existence during 1991 based on the report of Kalyanasundaram Committee10.What do you mean by forfeiting?Forfaiting represents the purchase of obligations, which fall due at some future date and arise from the delivery of goods in export transactions, without recourse to the previous holder of the obligations.11.What do you mean by leasing?A lease is a contract where the owner of the assets transfers the right to another person to use the assets against the payment of fixed lease rentals. In the case of one lease contract, there are two parties namely – the lessor or the owner and the lessee or user. The lessor remains owner and the leased property remains with the possession of the lessee.12.What do you mean by debt market?It is a market wherein the debt instruments are issued to the public by any company for investment and such debt instrument bears a fixed interest rate payable half yearly on specific dates and principal amount repayable on particular date on redemption. Debentures are normally secured/charged against the asset of the company in favour of debenture holder. The following are some debt instruments – debenture; bond; zero coupon bond; convertible bond; security receipts etc.,13.What do you mean by greenshoe option?It is an option provided by Securities and Exchange Board of India to a company which is coming out with one initial public offer to the public. By this option, the company can retain certain portion of the applications received through IPO in case of oversubscription.14.What do you mean by equity market?Equity market consists of investment by the public in different kinds of shares issued by the company and by subscribing for the shares, the investors are expressing their willingness to stand as owners of the company. The equity market consists of equity shares, preference shares, rights shares, bonus shares etc.,15.What do you mean by sweat equity?Directors and employees contribute intellectual property rights to the company in the form of providing technical know-how captured by way of research or contributed by way of strategy software developed for the company or adding profit and economic value. To compensate the directors and employees, the concept of sweat equity has come into existence.16.What do you mean by participatory notes?A participatory note is a financial derivative instrument issued against an underlying security and it allows the holder, to get dividend or capital gains earned from the underlying security although some of the holders may not be eligible to trade in stock markets in India.17.What do you mean by book building?Book building is the process to assess the demand for a particular public issue of various prices, based on which the issue is priced and sold to the investors.18.What do you mean by sensex?It is a stock market index provided by Bombay Stock Exchange for the information of the investors. The positive or negative variation in the index provides an insight for investment or dis-investment to the general public and especially the investors in the stock market. It is based on the market capitalization of top thirty shares earmarked by BSE19.What do you mean by Nifty?It is a stock market index provided by National Stock Exchange for the information of the investors. The positive or negative variation in the index provides an insight for the investment or dis-investment to the general public and especially the investors who are participating in stock market trading. It is based on the market capitalization of top fifty shares earmarked by NSE20.What do you mean by swap?A swap is a contract that binds two counterparties to exchange the different streams of payments over the specified period at specified rate.